A Practical Guide to Outsourcing your Payroll Operations

Whether you’re a small, medium-sized or large business, there are benefits to outsourcing the payment of your employees to an external contractor. Many of these benefits can be realised quickly following the negotiation of a contract with a payroll provider and continue to accrue as time goes on.

Once you’ve made the decision to look for an external contractor there are some steps you can follow to get the most appropriate provider for you as quickly as possible so you can start reaping the benefits for your company.

Define your requirements

Different companies look for different levels of service from their payroll provider. For some, just running the payroll and ensuring employees are paid is all they want. For others, a full-service package that includes managing timesheets and absence, as well as, pension administration and reconciliation with the business accounts will be what’s needed. Be clear about what you need and set this out in a brief to share with possible providers.

Invite proposals

Once you have your specification, you can approach likely candidate organisations and ask them to submit proposals for the business. Researching the market beforehand will help you narrow down your invitations to the outsourcing firms that are most likely to be able to meet your needs. It is then down to them to submit a bid within the specified timeframe.

Choosing your provider

Once you have received proposals, you’ll need to whittle them down. While cost is an obvious deal-breaker for companies looking to reduce costs in an increasingly pressured marketplace, there are other areas that you’ll want to take into account to make sure you take the right decision. Check qualifications, customer service arrangements, proposed methods for transferring sensitive data required to run payroll operations and follow up references. Although you don’t want to spend out more than you need, you also want to make the right decision in terms of workload and quality of the service offered.

A couple of payroll providers I know of locally and who have a good reputation are Niaroo Business Services in Burntisland and Kingdom Payroll and Bookkeeping in Dunfermline. You can find out about both companies by visiting here and here.

Thomson Cooper in Dunfermline also operate a Payroll Bureau and you can find their details here.

Contracting

With your chosen provider selected and notified of their successful proposal, the next step is to draw up a contract for the service you will receive from the company, and for them to define the terms under which they will be paid for their services.

Before entering into contract negotiations you’ll need to make some key decisions. First of these is agreeing who will be included on the negotiating team and their responsibilities in the negotiation. Deciding in advance how much the company can afford to pay and the ideal cost will give an idea of the scope for negotiation, as will the areas of service that are do-or-die and those that are up for discussion. This is a considerable element of your business that you’re outsourcing. Make sure you don’t give anything away lightly.

Planning the transition

If this is the first time you’ve outsourced your payroll services, you’ll be moving from your own systems to those of the third party organisation. If you’re moving from one supplier to another, there is an additional element of uncertainty.

Whichever way you’re going, planning ahead is crucial. Projects need to plan for Key milestones, interdependent steps, assurance and governance measures. These all need to be agreed to ensure that the service is safely managed over to the new provider. Working with your new provider to set target dates, criteria against which decisions to go ahead or delay will be made and agree on responsibility for making things happen will help with a smooth transition and prevent hiccups that could cost you, or your employees, both financially and in terms of inconvenience.

Conclusion

Moving your payroll services to an outsourced provider is a big decision and a lot of work to successfully conclude. However, with the right preparation and planning, you can get your new system in place and deliver results for your company with the minimum of disruption to your organisation or your employees’ salaries.

For additional advice or assistance in outsourcing your payroll just give me a call.